Danantara Indonesia eyes up to US$10bn loan debut
Indonesia’s new sovereign wealth fund, Daya Anagata Nusantara, or Danantara Indonesia, is looking to make its debut in the loan market with a jumbo borrowing of up to US$10bn, in what could become one of the largest loans from South-East Asia.
Danantara Indonesia, which was launched on February 24, sent out a request for proposals in mid-June to several banks for the loan with a response deadline of the end of the month.
While bankers were preparing to submit their proposals, some of the points in the RFP raised eyebrows among market participants. The loan will be unsecured and will not carry any guarantee nor come with letters of comfort or support from the government.
“It would have been better if the borrower could provide some kind of guarantee or support from the Indonesian government,” said a senior loan banker in Singapore. “Danantara Indonesia is newly set up, has no track record and is an empty holding company currently as the stakes it will hold in Indonesian state-owned enterprises are a work in progress.”
Danantara Indonesia will hold stakes in seven SOEs – Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia, Mining Industry Indonesia (MIND ID), state-owned power company Perusahaan Listrik Negara, energy firm Pertamina and telecoms company Telekomunikasi Indonesia.
It is not clear which stakes have already been transferred. For instance, in April MIND ID launched a tender offer for two US dollar bonds because the transfer of the government’s stake triggered a change of control clause.
MIND ID is a holding company that controls Antam, Bukit Asam, Freeport Indonesia, Indonesia Asahan Aluminium and Timah. Earlier in March, it clubbed a US$1bn one-year bridge loan to refinance bonds.
While all seven SOEs have tapped the loan market at some point, Danantara Indonesia’s inexperience is borne out in one of the other points in its RFP – banks have been asked to provide underwritten commitments as well as proposals on an uncommitted basis.
“Uncommitted basis is very unusual and I have not seen something like that in an RFP," said another senior loan banker in Singapore. “Banks could cite any amount in their proposals on an ‘uncommitted basis’. And what if they renege later on that point? My sense is that the borrower is trying to gauge sentiment among lenders with a very broad request and will zero in on more concrete terms after it has reviewed the proposals.”
The sovereign wealth fund is eyeing a multicurrency borrowing, including in US dollars, euros and yen, with tenors of three to five years. Proceeds are for general corporate purposes.
Ambitious size
The size of up to US$10bn is also ambitious, even though lenders in Asia Pacific are hungry for assets amid a slowdown in activity this year.
“A government-linked borrower is a godsend for lenders gagging for quality assets amid all the volatility and turmoil in global financial markets that has led to a great deal of uncertainty and caused dealflow to slow down,” said a senior loan banker in Hong Kong. “However, a US$10bn size is too big an ask, especially for a newcomer such as Danantara Indonesia. How many banks will have appetite to underwrite US$1bn apiece and take large portions as final holds? A US$2bn–$3bn size is more realistic.”
Some banks are hopeful of using the loan as a product that will lead to ancillary business from Danantara Indonesia such as M&A advisory services and debt and equity capital market fundraising. This could help draw more lenders and lift the size of the loan.
The largest loan from Indonesia is a US$3.75bn 13-year borrowing in July 2016 for the BP-led Tangguh 3 Liquefied Natural Gas project, according to LSEG LPC data. The largest borrowing from South-East Asia is a US$9.52bn project financing in November 2019 for the Refinery and Petrochemical Integrated Development project in Johor, Malaysia.
Danantara Indonesia is not the first sovereign wealth fund to borrow in the loan market in Asia Pacific, although financings for borrowers in the region have been few and far between. In 2017, state-owned China Investment Corp raised a €6.8bn borrowing to fund its acquisition of European warehouse firm Logicor, marking the sovereign wealth fund’s debut in the syndicated loan market. In March 2012, Malaysia’s Khazanah Nasional raised a US$400m three-year club loan for refinancing.
Meanwhile, Indonesia's finance ministry has launched a €252.8m five-year loan into general syndication, in what is a rare instance of the ministry tapping the syndicated loan market.
Indonesia's Temasek
Danantara Indonesia was set up with capital of at least Rp1,000trn (US$61bn) and is slated to eventually manage more than US$900bn of assets, in what officials have described as Indonesia’s version of Singapore's Temasek Holdings. In its first round of investments, Danantara Indonesia will put US$20bn into natural resources processing, artificial intelligence development and energy and food security.
Danantara Indonesia has a broader scope than the Indonesia Investment Authority, which was formed in 2021 and received initial capital of US$5bn from the government and Rp45trn of shares in Bank Mandiri and Bank Rakyat. INA, which has not borrowed in the loan market, was set up to attract investments into the country’s infrastructure, logistics, digital infrastructure, healthcare and green energy sectors.
According to reports, Danantara Indonesia, through its subsidiary Danantara Asset Management, has provided a shareholder loan of US$405m to national carrier Garuda Indonesia.
“While Danantara Indonesia is still finding its feet, it would do well to be very transparent about its activities,” said the second banker from Singapore. “The more information it is able to provide, the more lenders will become comfortable with taking on the credit risk. After all, bankers’ memories are still fresh from the scandal involving another high-profile sovereign wealth fund from Asia.”
The banker was alluding to 1Malaysia Development, which borrowed through loans and bonds in the previous decade and became insolvent following a multibillion-dollar corruption scandal.
Danantara Indonesia has lined up some heavyweight advisers. Former Indonesian presidents Joko Widodo and Susilo Bambang Yudhoyono were named members of the fund’s steering committee, while Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, has an unpaid advisory role alongside former Thai premier Thaksin Shinawatra, a billionaire who spent 15 years in self-exile avoiding jail for abuse of power and is father of Thailand’s current prime minister Paetongtarn Shinawatra.